The repeal of interest on federal student loans will cost more than $550 million every year as long as Ottawa’s plan to reduce interest continues in the future, according to the Department of Jobs.
Senators on the National Finance Committee heard from witnesses on November 22 about various costs associated with new government spending measures outlined in the Fall Economic Statement presented to the House of Commons by Finance Minister Chrystia Freeland .
One of the measures was to reduce interest on the federal portion of all Canada Student Loans and Canada Apprentice Loans starting in April 2023. The government has indicated how much the measure will cost over the next five years, as Blacklock’s Reporter first reported.
“Right now the investment is $2.7 billion over five years, but there’s also an ongoing cost of $556.3 million per year,” said Erin Hetherington, policy director for the Canadian Program. of student financial aid, during his testimony before the National Senate. Finance Committee on 22 November.
Hetherington said the estimated cost was calculated based on the amount of interest revenue the federal government is expected to lose over the next five years as a result of the measure.
“Which stakeholders were consulted on this? Would this affect future student loans? asked Senator Tony Loffreda.
“The reception so far has been positive for a change,” Hetherington said. “Many of our student partners have expressed their support for this measure.”
“I think we have to help our students,” Loffreda said. “But we don’t want to affect future loans to those same students.”
Over $500 million
MPs on the House of Commons finance committee have also questioned the costs of the future elimination of interest on federal student loans, with Conservative MP Adam Chambers asking how many new Canadians will be able to pursue post-secondary education because of the cuts of interests.
“It’s hard to say,” Atiq Rahman, assistant deputy minister in the learning branch of the Department of Employment and Social Development, replied on Nov. 21.
“Those [students] who went to school and then are in the process of paying back, some of them are struggling, especially with rising costs,” Rahman said.
“We’re going to spend $500 million a year,” Chambers replied. “The question is how many more students will be able to access post-secondary education.”
Rahman responded by saying the measure was intended to make loan repayment more affordable, adding that his department had not conducted studies on how many new students it would attract.
He also said the average Canadian student leaves post-secondary education with $14,000 in federal student loans.
“But on top of that, they also have provincial student loans,” he said.
Chambers said the federal government should have considered using the money to encourage more students to pursue college or university.
“So we’re going to spend $500 million to help students who are already in post-secondary education instead of providing the same amount in grants to help students who wouldn’t otherwise be able to go to school,” he said. .
“I know you don’t make the political decision, but I just wanted to put that on the record.”
Rahul Vaidyanath contributed to this report.